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What is franchise?

What is franchise?

Congratulations on your first step towards your own entrepreneurship. We are happy to help you find the formulas that best suit you. There is plenty of choice, in the UK more than 800 formulas are active. To help you get started, we have listed a number of things. Did you know, for example, that about 80% of an average shopping street is a franchise? Most franchises can be found in the Services branche. But what do you have to pay attention to, which pitfalls are there and how do you  prepare yourself for your own entrepreneurship? We would also like to give you a number of considerations before you plan an meeting with a franchisor. There are a number of questions that you must first answer before you proceed.

Franchise literally means freedom

A franchise is a way of doing business where you, as a franchise entrepreneur, enter into an agreement with the owner of a trade name (the franchisor) that gives you the right to exploit a business with that trade name against payment. This is done a lot in the UK, when you realize that at least 80% percent of an average shopping street is franchise.

The French word franchise (freedom) has ended up in English, and is derived from franc (free).

Recent research has shown that the chances of success of starting entrepreneurs in a franchise context (especially with more experienced franchisors) are around 90% and that a partnership in a franchise context achieves on average better turnover results than with non-cooperating independent entrepreneurs.

The difference between franchise or a branch company

The franchise company is similar to a branch, but a branch is wholly owned by the parent company and the franchisee is owned by the franchisee. A branch is led by an employee of the parent company and a franchisee is an independent entrepreneur. Characteristic of a franchise contract is the use of a recognizable formula.

For example, all Albert Heijn supermarkets in the Netherlands are recognizable as 'Albert Heijn' for consumers. More than 500 of these supermarkets are subsidiaries, ie owned by the parent company Ahold, but 200 Albert Heijn stores are owned by independent franchisees, such as the Albert Heijn to go's. For the consumer, however, the difference is not or hardly so.

  • The start-up of a company is simplified, because the public is already familiar with the formula.
  • The franchisee has the exclusive right to use the trade name in a specific (care) area.
  • The franchisee can immediately offer a completely tested product or service package.
  • The reputation of the brand is supported and protected by the marketing activities.
  • It is easier to contract loans for the company because the business risk is limited.
  • The franchisee retains his independence. He is his own boss.
  • The franchisor often offers training for staff and coaching for the franchisee.
  • The franchisee can fall back on the experience of the co-franchisees.
  • Benefit from the dedication of the franchisee for his own company.
  • Does not need to set up an extensive branch system.
  • Can introduce his product and know-how on a large scale to the market with limited capital.
  • Runs limited risk in case of expansion by means of franchise contracts because little own capital is involved.
  • He sells his products centrally to the franchisees.

Thorough research is advisable

It happens that dubious franchisors benefit from people who really want to start their own business and offer these unreasonable contracts. The franchisee, for example, has to start buying a very large batch of goods, while it is doubtful whether he can get rid of those goods. There are also franchisors who are only interested in having as many franchisees as possible pay for it and offering a questionable formula for success. The dubious franchisor disappears with the money or forbids complaints with the argumeent that entrepreneurs are responsible for their own profits. On the other hand, it also happens that a franchisor, eager to expand quickly, accepts franchisees that are not really suitable for this because they do not have an entrepreneurial character, or can not pay the start-up costs. A good, sensible and reliable franchisor leaves his franchisees through a selection procedure before he accepts them.

  • How long does the formula exist?
  • Since when as a franchise formula?
  • How has the network developed since then?
  • Is the franchisor an independent company or part of a larger group?
  • Is the trade name / trademark of the franchise properly protected?
  • If no, how does the franchisor derive his rights?
  • What is the financial strength of the franchiser (publication balance)?
  • How are the courses and training arranged?
  • Promotion (advertising campaigns and advertising material)?
  • What are the opening hours?
  • Is the administration done for you?
  • What about the purchase?
  • Financing (arrangement with a bank)?
  • Are all procedures clearly described in a manual?
  • Is all promised support funded from the franchise contributions?
  • The Franchise formula, what about that?
  • Do I, as a franchisee, get an exclusive territory?
  • Has a prior market and / or location location research been carried out?
  • What is the opinion of an expert about the franchise agreement?
  • Are all oral agreements also arranged therein?
  • Has the franchise agreement been checked against the European Code of Honor?
  • Which contributions must be paid once and which are paid continuously?
  • What makes the formula unique to the competition?
  • What is the (national or regional) market share of the franchisor?
  • Which expansion plans does the franchisor have?
  • Is the income to be achieved really attractive?
  • How many franchisees have failed in the past and why?
  • What future expectations are there for this product / assortment?
  • Are there clear investment and operating budgets for the location?
  • Is there clarity about the own capital contribution?
  • Talk to as many franchisees as possible.
  • Talk to the franchisor, get to know the most important people in the company.
  • Consult with anyone from whom you can reasonably expect help.
  • Ask any questions that you think of. No question is unimportant.
  • Compare other franchise organizations in the same industry.
  • Take the time for research, conversations and comparisons, otherwise you might make the wrong decision.
  • Assume a higher cost record than you initially assumed.
  • Cut back on advice from consultants. You will miss out on critical information.
  • It is your own risk and your own business.
  • Make sure you get the thing you want and do not take the first one you can get.
  • Have the investment and operating budgets of that time been realized?
  • How does one experience the relationship with the franchisor?
  • What do you think of the support from the franchisor?
  • Does the franchisor meet agreements made?
  • How is the participation of franchisees regulated?
  • How is the support from the franchisor?
  • Do I, as a franchisee, get an exclusive territory?
  • What is the size of the district based?
  • Has a prior market and / or location location research been carried out?
  • What is the opinion of an expert about the franchise agreement?
  • Are all oral agreements also arranged therein?
  • Has the franchise agreement been checked against the European Code of Honor?
  • Which contributions must be paid once and which are paid continuously?
  • What makes the formula unique to the competition?
  • What is the (national or regional) market share of the franchisor?
  • Which expansion plans does the franchisor have?
  • Is the income to be achieved really attractive?
  • How many franchisees have failed in the past and why?
  • What future expectations are there for this product / assortment?
  • Are there clear investment and operating budgets for the location?
  • Is there clarity about the own capital contribution?
  • Am I willing to work more than 40 hours a week to make my business a success?
  • How is my partner facing such a step?
  • Is he / she willing to contribute to success?
  • Do I have the qualities and sufficient experience to lead my own business?
  • Am I willing to observe rules that limit my entrepreneurial freedom?
  • Do I sufficiently realize that it is a long-term commitment?
  • Do I have sufficient capital to qualify for this franchise?
  • Are the franchises, the industry, the product range or the type of service available to me?

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